Gargantua Ltd paid $1 000 000 for 75% of the voting shares of Dwarf Ltd,and evaluated Dwarf's assets to be worth $1 500 000 and its liabilities $300 000.What was the goodwill on consolidation at the date of acquisition?

Question

Quizplus · Accepted Answer

The net assets of Dwarf Ltd are $1,200,000 ($1,500,000 assets - $300,000 liabilities). Gargantua Ltd acquired 75% of these net assets, which is $900,000. The purchase price was $1,000,000, so the goodwill is $1,000,000 - $900,000 = $100,000.

Gargantua Ltd Paid $1 000 000 for 75% of the Voting